Congratulations on your 1031 Tax Exchange! You were able to avoid paying taxes on a Capital Gain of $72,500. In addition, you successully deferred $72,500 towards your new property.

Using Defer'em, you minimized your Recognized Gain to $0, which is the amount you will be taxed on now.

Sold Property (Relinquished Property)		Purchased (Replacement Property)
1. 321, Adams Avenue, Atlanta GA Realized Gain, $72,500 Transaction Expenses, $57,500 (Purchase Expenses + Sales Expenses + 1031 Exchange Fees + Loan Acquistion Cost - Non-Like Kind Property) Basis, $295,000		1. 123, Eve Avenue, Atlanta GA Deferred Gain, $72,500 New Basis, $402,500

Taxable gain is the profit from the sale of this investment property that would be taxed if there was no exchange.

Although your property was sold for $425,000, you were able to account for expenses and minimize your capital gain to $102,500. You would have to pay tax on the Capital Gain if this was not a 1031 Tax Exchange.

Sold Property (Relinquished Property)
1. 321, Adams Avenue, Atlanta GA Taxble Gain, $102,500 Sales Expenses, $27,500 Adjusted Basis, $295,000

In an exchange, Realized gain is the profit from the sale and purchase of the property(ies). In a regular sale tax would be paid on realized gain. (Realized gain = Taxable gain + Non-Like Kind Property - Purchase Expenses - All 1031 Tax Exchange Fee - Loan Acquisition Cost)

By identifying expenses incurred for the property you received, you have minimized your realized gain to $72,500.

Sold Properties	1. 321, Adams Avenue	Total
Taxable Gain	$102,500	$102,500
1031 Sold Exchange Fee	$0	$0
Non-Like Kind Property	$0	$0
Purchase Expenses + 1031 Purchase Exchange Fee + Loan Acquistion Cost		$30,000
Realized Gain		$72,500

Net boot is result of netting cash boot and mortgage boot and is the amount that is taxed.
Cash Boot received (pocketed money) cannot be offset by increase in Mortgage boot paid (loan) and will be taxed.

You minimized your Recognized Gain to $0, which is the amount that gets taxed now.

Mortgage Boot		Cash Boot
Mortgage Boot paid is the increase in the loan in the new property. It cannot offset any cash boot received. You have a mortgage boot of $0, which is the difference between your new and old debt. If your mortgage boot is positive, your new debt is less than your old debt, and you might owe some taxes. Mortgage Boot, $17,500 Loan Paid Off, $50,000 Loan Paid Off, $67,500 (Loan Acquired - Loan Acquisition Cost)		Cash Boot received is any cash or value of the not like-kind property received in an exchange. Cash boot received cannot be offset by Mortgage boot paid. You have a cash boot of $82,500, which is the difference between the money you spent and the money you received. If your cash boot is positive, you received more than you spent, and might owe some taxes. Cash Boot, $82,500 Cash In, $347,500 (Cash Received + Loan Carried Back + Non-Like Kind Property) Cash Spent, $430,000

Deferred gain is the profit from the sale and purchase of the property(ies) that is not being taxed and its tax is postponed to the future. Basis is the amount of investment in the new property(ies). For taxes this is the amount used for future depreciation.

Your successfully deferred a gain of $72,500, which may be taxed in the future if you sell the property you received.

You spent $475,000 on property you received, and have a deferred a gain of $72,500, so your New Cost Basis is $402,500. Less the value of land, your new cost basis is the depreciable basis of your new purchased property.

Purchased Properties	33%	100%
	1. 123, Eve Avenue	TOTAL
Contract Sales Price	$475,000	$475,000
Deferred Gain	$72,500	$72,500
New Cost Basis	$402,500	$402,500